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Hutchison Port Holdings Trust Ships In With a 7.8% Yield For 2013

Hutchison Port Holdings Trust (SGX: NS8U) is the world’s first publicly traded container port business trust and the only business trust within the Straits Times Index  (SGX: ^STI).

It was spun-off in 2011 from Hutchison Port Holdings, a subsidiary of Hutchison Whampoa (HKSE: 13). The latter’s a HK$ 400 billion (approximately S$64 billion) conglomerate with businesses that deal with ports, properties, hotels, retail, energy and telecommunication.

Hutchison Port Holdings Trust (HPHT) has interests in ports located in Hong Kong and China. It announced its full year results yesterday evening, confirming its full year distribution of 41.00 HK cents, which gives the trust’s investors a yield of around 7.8% based on its latest price of US$0.66 per unit. In comparison, the trust had declared distributions of 51.3 HK cents in 2012.

Performance

For the 12 months ended 31 Dec 2013, HPHT achieved slightly lower revenue (a 0.3% decline to be exact) of HK$ 12.4 billion, even after accounting for the contributions from Asia Container Terminals, an acquisition that was made in March 2013.

The inability for HPHT to grow its top-line was mainly due to the drop in throughput of its deep-water ports. There was little change in its revenue breakdown geographically in 2013, with Hong Kong contributing about 45% of revenue and the rest coming from China; in FY2012, Hong Kong accounted for 46% of revenue.

In any case, HPHT also experienced higher operating costs and interest expenses, leading to the trust earning a profit of HK$1.68 billion, some 25% lower than it did in 2012.

Looking at HPHT’s balance sheet, the trust had increased its total debt significantly from HK$ 29.1 billion in 2012 to HK$ 33.8 billion. With the increase in borrowings, HPHT’s debt-to-equity ratio also went up from 0.34 a year ago to 0.4.

The trust’s operating cash flow for 2013 had improved from HK$ 4.41 billion in the previous year to HK$ 5.15 billion, mainly due to the acquisition of Asia Container Terminals. However, as the trust spent more than HK$ 3 billion in total for acquisitions in 2013, its free cash flow suffered a drop from about HK$ 3.6 billion to around HK$ 600 million.

Prospects

HPHT sees higher volume of containers being handled in its ports as economic growth in the US and Europe – “a major factor” in determining the volume of the trust’s business – is picking up.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Stanley Lim doesn’t own shares in any companies mentioned.